Schedule 2 and the Rules

In brief, much of the law that has always been in the Bankruptcy Act itself now appears in Schedule 2, and in the Rules, and some of the law that was formerly in the regulations now appears in the Rules. Schedule 2 now contains a series of Divisions in relation to the registration and regulation of trustees, the convening and holding of meetings of creditors, and creditors’ rights to information, trustee remuneration, financial controls, committees of inspection and powers of the court and of the Inspector-General in Bankruptcy. The Rules comprise more detailed provisions, also divided into Divisions.

A significant change is to transfer, and add to, the former Schedule 4A Performance Standards for trustees, which are now contained in Division 42 of the Rules.

Transitional arrangements

As with any new law, transitional arrangements are in place to determine which of the old law continues to apply, for example in relation to bankrupt estates that existed as at 1 September 2017. These arrangements are contained in the new edition.

Harmonisation

A purpose of the new structure of the Act is to harmonise the processes of personal insolvency with those of corporate insolvency, where possible. The Corporations Act has also been amended by the ILRA, fully commencing on 1 September 2017, with the addition of its parallel Schedule 2, into which the same sort of provisions as in bankruptcy have been transferred.

This harmonisation should lead to the development of a more consistent approach to the law and practice of insolvency generally.

Core bankruptcy provisions and related laws

At the same time, none of the core bankruptcy provisions is affected – those dealing with bankruptcy process leading to sequestration, voidable transactions, assessment of proofs of debt and payment of dividends. The same applies in corporate insolvency.

The publication has always been supplemented by necessary related laws – the Bankruptcy (Estate Charges) Act 1997, as also amended, and the Federal Court of Australia (Bankruptcy) Rules 2016 and the Federal Circuit Court (Bankruptcy Rules) 2016 as now amended to accommodate the new law.

Potential for further reform

A proposed law reform change that was announced by the government in 2016 is a reduction in the period of bankruptcy from three years to one, that is, with automatic discharge being available after one year. A bill to effect what would be a significant reform has, at the date of publication, yet to be introduced into parliament.

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